SMSF members engaging in property valuations in preparation for a fund audit must have proof those assets are held by the fund and may need to sign declarations to make that clear, according to a senior SMSF technical expert.
SuperConcepts SMSF technical and strategic solutions executive manager Philip La Greca said the issue of the ownership of property assets can be a problem, particularly for individual trustees, as land titles include limited information in regards to ownership.
“All assets are supposed to be in the name of the trustees and that can be quite problematic in some cases, and property is the main area of concern because most land titles do not show capacity,” La Greca said during an online briefing today.
“When you look at a land title registry, and where there are individual trustees concerned, the title says ‘John and Mary Smith’ and not ‘John and Mary Smith, as trustees of the Smith Family Super Fund’.”
He said this creates the need to distinguish when an asset is owned by a trustee on behalf of their fund as distinct from being owned by them as individuals.
“This is where acknowledgments or declarations of trust come which state a trustee does own an asset but they own in it in a specific capacity,” he said.
“I can draw an analogy with the bare trust in a limited recourse borrowing arrangement because the bare trust deed does state: ‘I own this asset as trustee or on behalf of another person, being the trustee of the SMSF.”
He said ensuring proof of ownership within a fund was critical as it is a requirement under superannuation covenants and operating standards and failing to meet the requirement carries an administrative penalty.
“Obviously with individual trustees this can be an issue, for a corporate trustee it is less of a concern, but the maximum penalty for breaching this requirement can be $4440,” he noted.